On Wednesday, oil prices ticked higher as the European Union, the world’s largest trading bloc, stated plans to phase out imports of Russian crude.
Brent oil futures increased 3.57% or 3.77 points to $108.75 per barrel. The international benchmark completely reversed a downturn of 1.58% to $105.88 per barrel yesterday.
US West Texas Intermediate added 3.68% or 3.78 points to $106.20 per barrel. It rebounded from Tuesday’s plunge of 2.62% to $102.41 per barrel.
Accordingly, European Commission President Ursula von der Leyen proposed to place an oil embargo on Moscow over its invasion of Ukraine.
The governing body also aims to sanction the Kremlin’s top bank in a bid to deepen the country’s economic isolation.
Subsequently, the Commission will slowly eliminate supplies of Russian crude within six months and refined products by the end-2022. The agency also pledged to minimize the impact on European economies.
Adding to the upsides, crude and fuel stocks in the United States skidded last week. The American Petroleum Institute reported that oil stocks skidded by 3.50 million barrels for the week ended April 29.
The figure was higher than the analysts’ expectation of an 800,000-barrel drop.
These supply jitters offset the demand concerns stemming from China’s prolonged COVID-19 lockdowns.
Moreover, economists noted that the global manufacturing purchasing managers index (PMI) contracted in April for the first time since June 2020. They emphasized that the tight Chinese health restrictions were a key contributor to the downdraft.
Then, traders also looked forward to the monetary policy decision of the US Federal Reserve later that day. The financial market anticipated the American central bank to intensify efforts to bring down high inflation by hiking interest rates.
OPEC+ forecast bigger 2022 oil surplus
The Organization of the Petroleum Exporting Countries and allies (OPEC+) forecasts a surplus of 1.90 million bpd this year. This outlook is 600,000 bpd higher than the previous estimate despite expectations of slower demand growth.
Correspondingly, the revision mirrors a weaker oil demand growth forecast adopted by the OPEC in its April crude monthly report. The organization estimates 2022 world oil demand to post at 3.67 million bpd, representing a 480,000 bpd drop from its previous forecast.
The OPEC cited the broad economic headwinds for the lower projection. It specified the impact of Russia’s invasion of Ukraine, rising inflation, and resurgence of the Omicron coronavirus variant in China.
Nevertheless, oil markets remained in a bullish pattern as supply worries continued to rise.